Impact Investing

59 Pages Posted: 20 Dec 2015 Last revised: 13 Dec 2019

See all articles by Brad M. Barber

Brad M. Barber

University of California, Davis

Adair Morse

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Ayako Yasuda

University of California, Davis - Graduate School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: December 12, 2019

Abstract

We document that investors derive nonpecuniary utility from investing in dual-objective VC funds, thus sacrificing returns. Impact funds earn 4.7 percentage points (ppts) lower IRRs ex post than traditional VC funds. In random utility/willingness-to-pay (WTP) models investors accept 2.5-3.7 ppts lower IRRs ex ante for impact funds. The positive WTP result is robust to fund access rationing and investor heterogeneity in fund expected returns. Development organizations, foundations, financial institutions, public pensions, Europeans, and UNPRI signatories have high WTP. Investors with mission objectives and/or facing political pressure exhibit high WTP; those subject to legal restrictions (e.g., ERISA) exhibit low WTP.

Keywords: Impact investing; venture capital; private equity; socially responsible investment; United Nations Principles of Responsible Investment (UNPRI); sustainable investing; public pension funds; willingness to pay; random utility discrete choice models

JEL Classification: G11; G21; G22; G23; G24; G28; H41; M14

Suggested Citation

Barber, Brad M. and Morse, Adair and Yasuda, Ayako, Impact Investing (December 12, 2019). Available at SSRN: https://ssrn.com/abstract=2705556 or http://dx.doi.org/10.2139/ssrn.2705556

Brad M. Barber

University of California, Davis ( email )

Graduate School of Management
One Shields Avenue
Davis, CA 95616
United States
530-752-0512 (Phone)
530-752-2924 (Fax)

Adair Morse

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ayako Yasuda (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-0775 (Phone)
530-752-2924 (Fax)

HOME PAGE: http://www.ayakoyasuda.com

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